Abstract This study reviewed the application of BBA in Malaysia. BBA or known as Al-Bai’ Bithaman Ajil is a financing facility that is based on a sale plus profit. It is commonly used by bank in Malaysia because it replaced the non-halal element in the conventional loan. However, there are some claims that the operation is not done correctly. Users especially the Muslims still doubt on its legality. Thus, bank officers were tested on how their bank operates it. The result exposed that the claim is not true.
It is recommended that there should be future research on how the information should be exposed to the public. Keywords: Bai’ Bithamin Ajil, Islamic banking. Introduction| 4| Literature Review| 4| Methodology| 6| Findings| 6| Discussion| 11| ConclusionReferences| 1213| Introduction Bai’ bithaman ajil is a financing instrument that derived from an equation of sale plus profit. Most Islamic banks in Malaysia are using this concept for their customers on various commodities such as; houses, cars, land and personal financing.
BBA is a substitute product for conventional loan which is believed to have impermissible element. The issue that really caught the attention of the writer for doing this research is people are still claiming that the principle of BBA is not correctly applied by the bank. It is said that this transaction involves interest (riba). As a solution, survey will be conducted and questionnaires will be distributed to the bank staff as well as its users. The purpose of the study would be to ascertain how islamically is the application of BBA and to examine ways on how to educate the users about the true concept of BBA.
The research questions have been set up as follows; * Do the bankers exactly know about the principle of BBA? * How BBA is being applied in banking system? Since this research is on the Islamic Financing product, some Islamic term has been introduced. BBA is normally defined as deferred payment sale. It is actually a solution to avoid interest (riba) as riba is not permissible in Islam. In a simple way, BBA is a loan in which its payment is free from riba. Literature Review For this research study, the issue here has been brought up by the other researchers.
The articles that are relevant to be reviewed would be about Islamic banking that focuses mainly on BBA. BBA is an Islamic alternative to conventional loan. According to Eltegani Abdul Gader Ahmad (2006); accounting transactions need to be changed since they do not conform to Islamic principles and teachings. Due to that reason, BBA and other Islamic financing instruments have been introduced. Ameen Ali Talib defined BBA as, “Sale of goods by the bank to its client at a price that includes a profit margin mutually agreed upon” (2006, p. 48).
Mohammed Obaidullah (2007) further emphasizes, BBA is a sale on a cost-plus basis in which is introduced to avoid riba. As cited in the Arab Law Quarterly by Salleh described that riba is unlawful excess or deferment (Foster, 2007). It is commonly translated as interest. The prohibition is mentioned in Quran (2:275). Riba is strictly prohibited in Islam because it can be seen as exploitation towards the needy where the rich become richer and the poor become poorer (Foster, 2007). Since conventional loan has the element of riba, Muslims are prohibited to use it.
Eltegani Abdul Gader Ahmad (2006) and Mohd Nasir bin Mohd Yatim (2009) discuss that people start to have interest in Islamic financing products. It can be seen through the rapid existence of Islamic banking branches from various banks. The users are not only Muslims but it also consists of the non-Muslims. However, Ameen Ali Talib (2006) found that there are accusations that the banks do not implement the concept of BBA correctly until public claim that this transaction contains riba but under different names.
Zairani Zainol (2008) stated that the accusation arise because the transaction is not a cost price. People assume that the profit from the sale is actually riba whereas it is not. Mohammed Obaidullah (2007) and Mohd Nasir bin Mohd Yatim (2009) agree that the bank finances the customer who intends to buy an asset. After the bank has acquired the asset at cost price, the commodity will then be sold to the customer at cost plus profit. At the end, the customer will pay the price by instalment basis. This is how BBA is being operated in Malaysia.
Hence, no interest is involved in this transaction. Due to this confusion, this study is looking into the issues related to the properness of handling such transaction. It is aimed to identify the reliability of the BBA’s transaction offered by the banks in Malaysia. Methodology This research tends to discover how effective the bank in operating the Islamic financing product. In achieving the aim and answering the research questions, survey has been conducted. Questionnaire was distributed to 10 Bank Islam staff and 10 Bank Muamalat staff. The bank involved is at area Kuala Lumpur Central.
The procedure of the survey started with meeting the manager from each bank. Then, the managers help to distribute the questionnaire to their staff. The given time to answer was 6 hours began at 10am and ended at 4pm. The survey is fully completed and the targeted sample size of 20 staff was achieved. After getting responses, the survey has been analysed by using Microsoft Office Excel and presented in pie chart form. The nature of the questionnaire is to answer the research questions that have been set up earlier on. It is also being done to get a clear view on how the operation looks like in the reality.
By asking the staffs to answer the questionnaire, it helps to solve any missing information from the secondary data collected. Findings This chapter discusses the analysis of data collection from questionnaires of the study. The data were plotted in graphs and pie charts. This data consisted of number of respondents respond towards the questions that were presented based on the issue of political participation to make my research. This figure shows the number of Muslim staff in the chosen bank. The blue area shows that there are 17 Muslim among the 20 workers and the rest is epresenting by the red color. The chart shows how many people understand the meaning of BBA. Of 20 respondents, 15 agree that they understand its meaning. While only 2 who are strongly agree about it. Among the 20 respondents, 3 workers give negative feedback. 1 person disagree that he/she does not know the meaning and 2 are strongly disagree about it. This figure shows the understanding of the staffs regarding its implementation. Almost all of the staff which is 16 people agree that they know about the implementation. Only 1 strongly agrees about it.
Whereas 2 people have no idea at all regarding its implementation and only 1 disagrees about it. For this question, 100 percent agree that the bank follow the guideline that has been set up by the Shariah. This chart focuses on the users of the product. Majority of the staff agree that the customers are aware on the existence of BBA. Only 2 disagree on the statement. Regarding on the understanding of the customers, 5 staff on the stand that the customers do not understand about BBA and the rest agree with the statement that their customers understand it.
The figure shows 15 people are strongly disagree that BBA is the same with the conventional and 2 people disagree on it. However, 3 staffs are on the stand that BBA is merely the same with the conventional one. All staffs disagree with the statement. Discussion Bankers in Islamic banks are more positive in relation to Islamic banking products and services. Based on this outcome, it is clear that the bankers in Islamic banks are more exposed to the Islamic banking products and services, since they are involved with the operations and transactions.
From the findings, it shows that majority of the staff know the meaning of BBA and they are aware on how their banks operate it. 100 per cent of the respondents agree that the transaction conforms to the Shariah principle. All agree that their banks manage to operate BBA as required by Islam. However there are few respondents who have no knowledge about BBA. This is may be due to the respondents who are not related to the field of study since some of them are security guard at the office. 85 per cent of the respondents believe that BBA is not the same with conventional loan.
The remaining who disagrees might be from the non-Muslim staff. But in the end, 100 per cent are on the same stand that BBA is applied correctly by the bank. Thus, the accusation that BBA involves with the negative element is not true. It can be infer that this accusation arise due to the lack of knowledge from the customers itself. The public are not exposed on how the operation goes. Conclusion This research was constructed to investigate the effectiveness of using BBA. Many people claim that BBA is not properly applied by the bank.
The primary data were collected by designing and distributing a set of questionnaire to 20 respondents from the bank staff randomly. From the research questions at the beginning of the study, it is now possible to state that this study sets out to (1) ascertain how islamically is the application of BBA (2) examine ways on how to educate the users about the true concept of BBA. From this study, it can be concluded that the application is exercised correctly. Both the staffs and the customers agree that BBA is an alternative for the conventional loan.
However, there is some staff that is still in doubt with the product. This may be due to the lack of understanding about the subject itself. As a solution, bank should promote more about the Islamic instrument and advertise it by using various forms such as TV, radio and internet. This research should be expanded further. It is suggested that the next research will be on ways to educate the customers regarding Islamic banking product. In a nutshell, the overall findings of the research signified that most of the bank staff find the Islamic product as effective.
